The United Arab Emirates has succeeded in a few years in transforming into a global model for economic diversification through the initiatives, strategies, and measures that have been launched to enhance the contribution of all sectors to economic prosperity, in addition to oil and its various industries, based on the largest national Emirati strategy for the post-oil phase. The UAE, under the leadership of His Highness Sheikh Mohammed bin Rashid Al Maktoum, Vice President and Prime Minister of the UAE and Ruler of Dubai, strongly emphasized this direction four years ago when he stated, "70% of our national economy is not reliant on oil, and our goal is to achieve a new equation for our economy that does not depend on oil or is tied to market fluctuations. We will add new economic sectors and develop the efficiency and productivity of the existing sectors, preparing generations capable of leading a sustainable and balanced national economy."
The UAE's economy is among the most diversified in the region and among all major oil producers, with non-oil sectors contributing more than two-thirds of the GDP. Local and international reports confirm that the UAE has transitioned from an oil-based economy to an economy characterized by production diversity across various fields. The UAE preempted shifts in the oil sector and fluctuations in its prices with a series of measures that boosted the contribution of other sectors to the state's economy, which now contribute more than 70% of GDP, compared to 30% depending on oil. This is despite the fact that the UAE possesses significant oil wealth and has the sixth-largest reserves in the world for oil and gas.
The UAE is one of the most prominent countries due to its location at the heart of the world's continents and its possession of a modern transport network, particularly in airports and ports. Approximately 2.4% of global container trade passes through the UAE, in addition to having a legal and legislative framework that protects investments, a strategic vision for the future, the ability to support innovations, attract investments focused on future sectors, and develop existing ones. This is all within a dynamic economic environment that enhances the value of all investments and increases their potential returns in a unique living and working environment that fosters investment and creativity.
The "Fifty Projects" initiative showcases the investment advantages of all sectors in the country, enhancing the desire of investors, talents, and entrepreneurs to invest in these sectors within a safe and vibrant environment characterized by stability and high financial returns. Furthermore, the UAE has the capacity to provide a nurturing environment for all forms of new investments, particularly in promising sectors such as space industries and those related to the Fourth Industrial Revolution and technology industries, in anticipation of future shifts in the global economy.
The UAE has actively pursued economic diversification and preparation for the post-oil phase by launching the largest comprehensive strategy targeting preparedness for the next fifty years, through the post-oil economy plan aimed at equipping all its vital sectors for the post-oil phase, alongside the timelines set in the national agenda 2021 and the UAE Centennial 2071, to entrench and solidify economic diversity.
The UAE has signed nearly 134 agreements to encourage investments with its trade partners, serving as a fundamental gateway to diversify investments in the state. These agreements attract investors in both traditional and newly developed sectors, providing them with an attractive and secure environment. New amendments to the commercial companies' law allow for up to 100% foreign ownership in companies, alongside no corporate taxes and no income taxes.
### Global Rankings and Indicators
All international reports indicate high rankings concerning the UAE. The United Arab Emirates ranks first regionally and 15th globally in the Kearney FDI Confidence Index for the year 2021, advancing four places compared to 2020, surpassing several major global economies. According to the UNCTAD World Investment Report for 2021, the UAE ranks first in the Arab world and regionally and 15th globally in its ability to attract Foreign Direct Investment (FDI). The UAE advanced 9 positions from its ranking in the 2020 report, attracting FDI worth $19.9 billion in 2020, an 11.24% growth compared to 2019, capturing 49% of the total FDI flowing into Arab countries.
The UAE also held the first position in the West Asia region, accounting for 54.4% of total inflows to this area, valued at $36.5 billion. Additionally, the UAE ranked first in the Middle East and North Africa, capturing about 40.2% of total FDI inflows to this region. In the UNCTAD report, investment flows into the UAE in 2019 amounted to approximately $13.787 billion compared to $10.385 billion in 2018. The UAE ranked first among emerging markets in the MENA region and sixth globally regarding the ratio of FDI inflows to its average GDP over the ten years preceding 2019.
UNCTAD's report stated that countries like the UAE, with strong performances, show promising future prospects for attracting FDI and consequently for economic growth, given the significant contribution of FDI to GDP growth. The UAE has achieved rapid growth in FDI inflows in recent years.
The UAE leads global indicators, ranking second globally in financial assets from sovereign wealth funds, being one of only three countries with over $1 trillion invested through sovereign wealth funds, alongside China and Norway. It ranks 11th globally in the logistics performance index, first regionally, 12th in infrastructure quality, first regionally, 13th globally in outbound FDI in 2020, and first regionally, 16th globally in the World Bank's Ease of Doing Business report for 2020, first regionally. The UAE secured first place in 121 indicators, first in the Arab world in 479 indicators, and joined the club of the top ten in 314 indicators, maintaining its position among the best countries in terms of competitiveness and ranking 25th globally in the Global Competitiveness Report issued by the World Economic Forum, while being first regionally.
The UAE has managed to enhance its non-oil sectors, establishing itself among the 30 strongest economies globally with a GDP of $421 billion in 2020 (1.6 trillion AED), leading its economic diversification journey from an oil-reliant economy to a knowledge and innovation-driven digital economy. The UAE ranks 21st globally in the UN's World Happiness Report, first regionally, and 10th globally in healthcare efficiency, also ranking first in the region.
### Trade Contributes to Economic Diversification
The UAE's non-oil foreign trade has grown more than 1600 times over the past fifty years, rising from about 1 billion AED in 1971 to 900 billion AED in the first half of 2021, marking a 27% growth compared to the first half of 2020. The country has achieved advanced positions in global trade due to economic accomplishments recognized by international organizations, including the World Trade Organization, which ranked the UAE 20th globally in the list of exporting countries and the same rank in the list of importing countries, third globally in re-exports, and first in the Arab world, making the UAE the leading market for exports and imports in the Middle East and North Africa.
The value of non-oil goods exports reached nearly 170 billion AED in the first half of 2021, growth of 44% compared to the first half of 2020, while the value of goods imports during the same period exceeded 482 billion AED, achieving a 24% growth compared to the first half of 2020. The UAE also ranks 18th globally and first in the Middle East as a services importer, with a value of $74 billion in 2019, showing a 2.4% growth compared to 2018, while its service exports reached $73 billion, 17th globally and first in the Middle East.
### Investments Support Economic Diversification
In recent years, the UAE has consolidated its investment appeal by attracting significant investments that raised its cumulative foreign investment to about $174 billion (approximately 639 billion AED), reflecting its attractiveness and competitiveness through its legislative environment regulating the business community and its massive infrastructure. It is expected that foreign investment will continue to flow into the UAE in the coming years, particularly after extending facilitation to investors through amendments to the commercial companies' law, welcomed by the business community domestically and internationally due to the leading incentives it offers to foreign investors, such as allowing up to 100% foreign ownership in most sectors and activities, except for a limited number of strategically significant activities, which adds to the attraction factor for further investment in the future, especially non-oil investments, making the UAE gradually move towards a larger and faster non-oil economy, in line with the state's goals, programs, and initiatives announced at various stages.
### Industry... Ambitions Without Limits
Industry is one of the sectors focused on to enhance economic diversification and increase its contribution to the UAE economy. The UAE launched the National Strategy for Industry and Advanced Technology Operation 300bn, a comprehensive ten-year governmental strategy aimed at promoting the industrial sector in the country, expanding its size and scope to become a primary lever for the national economy, with goals to enhance the industrial sector’s contribution to the state's GDP from 133 billion AED to 300 billion AED by 2031, focusing on future industries based on advanced technology and Fourth Industrial Revolution solutions to empower the economy and promote sustainable development.
The strategy aims for self-sufficiency in many vital industries, enhancing the added industrial value through improving the quality of local industrial products, supporting them, and promoting them locally and globally, while creating an appealing and encouraging business environment for local and foreign investment by providing competitive advantages and facilities. This contributes to establishing the UAE as a leading industrial hub in the Middle East and North Africa and transforms it into an experience conglomerate to attract developers, innovators, and talented individuals, leading in competitiveness, prosperity, stability, and sustainable development indicators.
The strategy implemented by the Ministry of Industry and Advanced Technology through various stimulating programs and initiatives aims to develop the industrial ecosystem, supporting the establishment of 13,500 small and medium enterprises, goals that will also foster economic diversification.
### Tourism as a Key Contributor
The tourism sector is one of the important sectors that enhance the country's economic diversification, contributing about 11.9% or 177 billion AED (48 billion USD) of the GDP, which is among the highest global percentages compared to leading tourism countries. The UAE ranked first regionally and 33rd globally in the Global Tourism Competitiveness Index and achieved high positions in several sub-indicators, ranking fourth in the air transport infrastructure index and sixth in sustainable tourism and travel sector development. The country ranked seventh globally in tourism infrastructure quality.
In 2020, highlighting the leadership’s emphasis on the importance of the tourism sector, the UAE achieved multiple achievements including being elected as chair of the Regional Committee for the Middle East at the World Tourism Organization (UNWTO) until the end of 2021 and being nominated for membership of the Executive Council of the UNWTO, which underscores the UAE's leading position as a distinguished tourist destination, reflecting the trust the state enjoys as a sustainable tourist destination.
The UAE also recorded high occupancy rates in its hotel establishments in 2020 and achieved second place globally in hotel occupancy driven by effective mechanisms to combat the Covid-19 pandemic. Tourist activity in the UAE is expected to witness significant increases in 2021, particularly with the hosting of Expo 2020 in Dubai, positively reflecting on international travel. Furthermore, local tourism will continue to grow supported by government efforts to support domestic tourism through various campaigns such as "The Most Beautiful Winter in the World."
### Space Boosts Economic Diversification
The UAE is focusing on new areas to support and enhance economic diversification. In addition to traditional sectors, emphasis has begun on new sectors, with the space sector being a prominent field in terms of expertise, knowledge, science, and industries. The growing capabilities in science and technology are a fundamental pillar enhancing the space sector in the UAE's economy, both scientifically and in partnerships to bolster economic diversification, which is expected to be a key enabler for the future economy, especially after investments exceeded five billion USD across various activities in the space sector since the establishment of the UAE Space Agency in 2014.
In line with the UAE Vision 2021 and the UAE Centennial 2071, a set of objectives has been outlined for a world-leading government in various economic and social fields, establishing the National Space Policy with several principles and objectives for the UAE space program to achieve this vision and goal. The National Space Policy emphasizes the importance of the space program to continue developing the role of the space industry in expanding the UAE's knowledge-based economy and enhancing the contribution of the space industry to diversifying the UAE economy, developing effective methods to attract space companies and increasing investments in the UAE space industry.
The plan for enhancing space investment aims to achieve these directions in the National Space Policy by providing a world-class approach within the UAE to facilitate more investments in the space industry and contribute to achieving the vision of the UAE 2021 and Centennial 2071, as well as the Fourth Industrial Revolution plan in diversifying and sustaining the UAE economy, strengthening its knowledge-based economy, and promoting research, development, and innovation while encouraging entrepreneurship and small and medium enterprises.
### UAE Leads in the Technology Sector
The technology sector today is one of the foremost areas that the UAE focuses on to enhance economic diversification and facilitates increased investments. The UAE ranks fourth globally in the commercial application of fifth-generation services and was the first country in the world to appoint a Minister for Artificial Intelligence and opened the world's first university specializing in artificial intelligence. The UAE holds a leading and advanced position in investments in emerging technology industries aimed at enhancing investments in non-traditional sectors as part of the country's transition to a knowledge-based economy, solidifying its position as a global hub for innovation and advanced technologies.
Moreover, the UAE leads the region in investments in technological advancements, possessing the highest number of startups in technology, which helps establish better standards and the highest levels of transparency in the technology sector, thereby enhancing growth in companies. The UAE focuses on specialized technological fields, including biotechnology, ranking first in the MENA region in terms of new foreign direct investment projects in this sector, and third regionally in terms of capital invested in these projects from 2003 to 2020. The UAE's interest in this sector comes amid efforts to develop other sectors based on technology, such as agriculture and industry, with a focus on artificial intelligence and digital technologies, thereby presenting a comprehensive investment package working collectively to enhance economic diversification and the returns of this diversification on various sectors and the overall UAE economy.
